Stumptown Coffee - Another Starbucks in the making?

by chee Leng (on coffee makers)
(Singapore)

TSG Consumer Partners, a company that buy companies like Vitaminwater, Smart Balance and Terra Chips, recently just invested in Stumptown Coffee Roasters.

In addition, they are talking to other small espresso bars (but the ones that have a large groups of loyal followers) such as Blue Bottle Coffee, Counter Culture Coffee and Joe.

Espresso bars such as this have never been big business because their owners are really into coffee, taking care of the interest of all the stakeholders including the growers, it is also unlikely that it would ever be big business.

Then, why is TSG consumer partners investing in it?

1. Coffee lovers have worried about the pricing, even though the coffee pricing is at all time, and Starbucks raised their price by 20%, they are still growing.

Consumers that are not affected by price and are loyal to a brand is a prized asset.

2. Of course, brands that TSG is talking to are all respectable in the coffee market (Where even someone like me from faraway Singapore has heard about them!).

And with this brand, comes a large group of loyal coffee drinkers.

3. If you follow the news, companies that are making the loudest noise, most launches and promotions (other than Social media and Smartphones industry) are the F&B.


I lost count how many times I have mentioned Starbucks in this column just this year! This highlights how much potential there is in this market for companies to tap into.

So, TSG might be buying into a good company but would it be able to "flip" and sell to Nestle, Coca-Cola or Starbucks for bigger bucks.

Here is my $0.02.

If TSG is really looking into selling into these three companies then they should probably fired the guys that does the backend research for them.

Do not think the three companies would be interested in it.

1. Nestle

While, it is true that they are opening cafes in Europe, they have tinkle with the cafe models for years and knowing their Modus Operandi, it would be one that caters to the mass rather than speciality coffee.

Moreover, their stakes remains firmly in the modern trade, which means they would definitely put the money where their mouth is -Nescafe.

And with the patent ending for Nespresso, another of their revenue generator, they are more likely to pump marketing fund into Dolce Gusto than acquire a new chain (who is going to run it?).

2. Coca Cola

After their Far Coast saga 3 years ago, have not hear much about Coca Cola planning another assault into the coffee market.

The only coffee solution which they are likely to acquire would be one that would benefit their vending business, and I do not think the specialist espresso bars mentioned above offers the solution Coke is looking for.

Even their iced coffee Issimo with Illy has gone all quiet after a big launch 2 years ago.

Again, soft drinks is their money generator, and I investment into vending machines and marketing is where they would have parked their money.

3. Starbucks

With Via expanding and a new partnership with keurig and with Mr Howard Schultz stating he intention to enter the Modern Trade, do not think acquiring a few high street cafe is his intention.

While, it is true that Starbucks need more people to drink their coffee, but why concentrate on just US (North America) when they can expand to brands hungry market Asia?

That being said, is my $0.02.

For all you know, it might be purchased by Pepsi (Yum group) tomorrow!

F&B is a dynamic market, what is seem as impossible today can generate big bucks tomorrow.

The last point is this: Stumptown success is because of their loyal coffee drinkers.

They prefer Stumptown coffee to Starbucks (and this is a group of folks that probably don't drink Nescafe or used Nespresso), so wouldn't changing Stumptown structure and business model alienated the loyal followers?

And without these followers, is Stumptown from any other cafe?

So, I think is best to keep Stumptown as it is, I think the signals are clear that the world is suffering from Starbucks Fatigue (then why do you think Starbucks slow down opening outlets and focus on Supermarkets?).